he had a lot of blood of u.k.'s soldiers on his hands. he said, i had to sit across the table from him. . .

it is that the company commander level that this activity was taking place pitta you can see some of the people who were part of that. we need to impose limits as to the closer to there is specific circumstances and the kind of intelligence support that they needed that could tell them what did these guys are telling the truth in general or could be trusted and so forth. we have to go through that same process and afghanistan. frankly, because he did not same -- have not had the same density of troops or structures, we have some significant work to do there. certainly, the general was

keenly aware of that. they make a very good team. they are already working on a joint military campaign plan that is similar to the one that we put together for iraq. parted this pushes us to with the question around leadership. as these decisions are made, how do you think about leadership and the changing role of military leadership, including afghanistan. how the start to think about that step. >> this is a great topic. this is a whole car. greeting. -- this is a whole paur point briefing. can you change a slide that you can pop up? we will see if microsoft will be cooperative the help desk is

often. [laughter] ipeople ask how you develop leaders never comfortable and the situation. the answer that i give is a unique people who have had out of their intellectual comfort zone experiences. for me, it was a graduate school. i went there and thought i was a reasonably swift fellow. our muckers up rep was the first in the class. -- microsoft rep was first in class. there are some really smart folks out there that do not to the world the way we do. some see it very differently. some have the extraordinarily different assumptions about the state of nature as it is called. that is a very salutary experience to have. to learn about political

philosophy, of basic economic concepts, it puts you in good stead epidote it was just a process of being in a situation where it was out of my intellectual comfort them. this shows cogs. what this is is a so-called engine of change. when those privileged to be a three-star commander of the farm center, we controlled a lot of the elements that made elements thatcogs. -- elements that made these cogs. that drives that cog, and the big ideas that guides the education of our commission and our leaders have and all the different schools and centers. you adjust that based on this better than you have to change the way you train your unit.

we have to change how you conduccombat operations. these are conducted by leaders who learned this right here. and then you have to have a feedback mechanism. we have the center for army lessons learned. that helped to refine the doctrine and it just the curriculum, and make tweaks to the scenarios out in the training centers, and it changed your conducting operations. all of this is facilitated by microsoft. there are a lot of applications that make this a greater world. these are virtual communities, the ability to look over the shoulder that are in iraq and do it through the internet, to see

the orders they are receiving, and the intelligence they are getting, the orders they issued, and their significant activities of that day. we are producing a learning organization. what you are after again is leaders. that is the topic. they are comfortable with this kind of operation, which is different. this is not traditional military. it is a hybrid form of warfare. it is below -- irregular warfare predict they can leave unit in the conduct of a. they know that they will have to continue to learn then. this model is applicable to any organization, because leaders have to get the big ideas right, they have to communicate them effectively. they have to oversee their implementation. and they have to then capture lessons learned and best practice.

>> our final question, leaders getting the ideas right. our final question is, would you please address how the change from the bush administration to the obama administration has affected the military priorities in the way you do your job? >> i am pausing because i've had some of these compare and contrast kind of questions. to be candid, they are a tiny bit uncomfortable in some respectabls. boast -- both of them haven't of the serious about what it is they are doing, it truly committed to the welfare of the country and the men and women in the service. one was in the final years -- obviously when i have that kind of close contact -- the early in the other in the early years. the processes that we have gone

through with president obama and his it ministration have been -- and his administration have been very good. we met after the day they took office. we met on iraq. i was in kergazstan and got the call to be back with an 28- hours. we made it back in time. we have the meeting in iraq. i had to get on the plane and head back to the central command headquarters. each of those began the process of a roughly 60 the review. i very strongly supported the decision that was made on iraq. it was very pragmatic and a good decision. i feel the same way about the afghanistan/pakistan strategy. we have had area virginity for input. we have had subcommittees with

the president -- we have a good opportunity for input. we have had subcommittees' with the president. everybody is trying to get it right. i think the objective that was laid out is vitally important as i mentioned. i have to make sure that it does not become a sanctuary for the extremists who are able to did you -- do to us what they did on 9/11. that does require a comprehensive effort as i described to you. it requires substantial and sustained commitment to our partners in pakistan as well. i think that the process has been good. i strongly support the outcome and strategies that have been adopted and the review process is an oversight that have been conducted since then. >> the goal of the affairs

council is to help every person to become a world system. there is nothing harder right now than picking up the role the u.s. as a prop. -- then thinking about the role the u.s. has a broad. these issues are things better or to affect our future. we are the third largest investment in the nation. these are issues that important to us. please join me in thanking the general petraeus. [laughter] -- [applause] costs now look at the supret poll. >> this one was commissioned by c-span. commissioned by c-span about the

supreme court. rob green of 10 polsteres. one of the questions we asked is can you name the individual chosen by president obama to serve on the supreme court? 43% said sonia sotomayor. another question asked is if confirmed, what would be historic about her? caller: impressive again. 66% would say that she would be the first hispanic nominee.

why do you think the high awareness is there. there's been a good deal of news about it. it's always a 2-way street with information like this. everything from property rights to civil rights. because this is so important, they follow with interest. host: before we get to the larger question of the supreme court, another question we asked about was the first woman

nominee. this was sandra day o'connor. 59% did not know it was her. did that surprise you? caller: she remains a very important figure and served for, i guess, a little over 20 years. was struck by that. i thought it was interesting that there's even greater awareness of sotomayor. host: what does that tell you? caller: just that there's an enormous interest in her nomination. host: what did you find when it came general knowledge about the preem court? iks in some respected, the

public. the voting public and the broad aspect. there where some other choices as well. >> can you name any justices on the supreme court? only 46% say yes. caller: that's interesting. where we started to see a slide

they were aware that 3/4 know that it is a lifetime term. you talked a little bit earlier about how the supreme court and american seem to know that the supreme court made a difference in their lives. how many can name a specific case? there is really only one case. that is a row vs. wade. -- that is roe vs. wade.

it has been in the news now for three or six years. -- 36 years. also, brown verseus the board of education. people were free to decide in the case said they could think of. were free to cite any case, really basically all the understanding was around roe v. wade. host: and what do people think about cameras in the courtroom? caller: i should say, strong support for cameras in the courtroom. host: did you find out why? >> we learn that there's some

high school civics aspect of the court that these justices sit essentially for life. we knew that. we sense a real hunger about what's going on in the court. we have the interest in the sotomayor nomination. what's driving the support for more televised coverage is -- the best way i can describe that is telling you the considerable interest in her nomination. host: tell us about the methodology. >> we conducted a survey on line on tuesday this week.

this is a cross sample of american voters. host: tell us about your firm. >> we are a well-known research based consulting firm. in particular in the united states, we work with democraticó thank you very much. >> coming up on c-span, the

southern poverty law center talks about hate groups in america. then a conversation on the nomination and confirmation hearings for judge sonia sotomayor for supreme court justice. after that, treasury secretary timothy e. geithner on derivatives regulation. >> coming up this weekend, saturday, and the robert mcnair from 1995 talks about his book "in arresters but -- in retrospect." then they will talk about the bush administration and the obama presidency. he is interviewed by a wall street journalist columnist. that rears on sunday night. also, books on the economy. the international collapse was

predictable and is far from being over, he says. how a second grader beat wall street. a panel of officers talks about the current economic crisis and what to do about it. then a congressman henry waxman on his 35 years in the u.s. house. there is a lot more on "book tv." go to our website booktv.org. >> how c-span funded? >> private donations? >> public support. >> you are funded? >> private contributions. >> 30 years ago, america's cable companies created c-span as a public service. it is a private business initiative, no government mandate, no government money. >> a discussion now on hate crimes and extremist activity. you will hear from morris dees

who co-founded the law center. he talks about the legal efforts to hold certain groups accountable for violent acts. this is about an hour. host: caller[captioning performy national captioning institute] [captions copyright national cable satellite corp. 2009] we are the world's leading professional organization for journalists and are committed to the future of journalism by providing informative programming and journalism education and fostering a free press worldwide. for more informational of the press club, please visit our web site at www.press.org.

on behalf of our 3500 members worldwide, i would like to welcome our speaker and a guest in the audience today. of and also like to welcome those of you who were watching on c-span. we are looking forward to today's speech and afterward i will ask as many questions from the audience as time permits. please hold your applause during the speech we had time for as many questions as possible. for our barack's audience, if you hear applause, it may be from guests of the general public to attend our luncheon and not necessarily from the working press. i would now like to introduce our had guessed and ask him to stand briefly for when their names are called. from your right, fred gilbert, milwaukee journal sentinel. freedom of information director, the reporters commending. austin, chairman of washington

editors. susan starke. freelancer and co-chair of the treatment committee. julien, chairman of the naacp and first president of the southern poverty law speakers. to my right is militia -- is melissa , vice chair of isnpc speaker committee. sharyl, and the director journalism recruiting for npr. peggy roberson, retired from the first washington bureau. joe, managing editor of

america's bloomberg news. [applause] just off of them all, between 14th street stand the u.s. holocaust memorial museum. its mission is to preserve the memory of 6 million jews other minorities and murdered by nazi germany and its clever richter. it serves not as as a monument to an unprecedented tragedy, but is a warning of the dangers of unchecked hatred and the violence that it inspires. why month ago today, and 80- year-old man walked up to the museum. officer stephen tyrone johns held open the door for this elderly man. he responded by allegedly shooting him in the face with a rifle. it was only the best action of this fellow guards that kept his

murder from becoming the first death in what could have been a planned massacre. a subsequent search turned up a listing of other places including the white house, capital, the national cathedral, and the washington post. there is a note: the holocaust a light and anti-semitic grant. we are right to be shocked by the shooting of the holocaust museum. we should not be surprised. prior to 9/11, the deadliest terrorist attack on u.s. soil was the 1995 bombing by timothy mcvey. 160 people were killed. 19 children and another five and your people were injured. since that time, there have been no fewer than 75 attacks and planned attacks within the u.s. motivated by radical ideology. there have been 10 cases with in the past year alone, including 11 murders and three

assassinations been against president-elect obama. our speaker has made his life work to hold those to make such lifework accountable. he has been a leader in civil rights and liberties for more than 40 years. as founder and chief of the southern poverty law center, he has pioneered the strategy of holding hate groups responsible, filing civil suits that been corrected major white supremacist organizations. his work has earned him praise from the american bar association, the national education association, the civil liberties union, and the naacp. it is also resulted in attempts on his life and those of his colleagues. he joins us to discuss the report released today analyzing domestic terrorism and the documenting of the presence of

what the consists in the please join me in giving a welcome to morris deeds. [applause] >> thank you. thank you very much for the opportunity to address the national press club and those media people who are sitting here now, still free to apply. -- to applaud. i will try to recognize those in the audience who invited, but i would like to recognize congressman dave this is a canada for governor in alabama. he is a very wonderful

spokesperson for our state. i want to talk a bit about u.s. domestic terrorists, the threat posed by extremists in this country. we know that james von braun walked in and shot a security got in the face and killed him, a shocking thing to happen. he had a website called of and with the holy western empire." he had written a book called " kill the best gentiles." and me read you a paragraph out of this book. on the world stage, a tragedy of enormous proportions, the calculated destruction of the white race and incomparable culture it represents. europe is in now overrun by hordes of non-white among girls. this man had a long history in

the holocaust denial movement. he blamed jews for the destruction of the white race in america and the world. there was a note that was found in his car. he said that obama was created by the hews. obama does what his jews owners say. he almost ended his life targeting the object of his heat. -- hate. was he just one lone nut? somebody we should not take seriously because we have blown it next to a done this kind of things throughout the history. you just heard about timothy mcvey, his bombing of the oklahoma federal building. he killed 168 people.

there have been numerous plots and oklahoma city. you go to ascendency all the plots to destroy things. due to the very good work of the fbi and justice departments, local and state and federal police, most of these plots have been stopped. since the election of president obama, we have seen obamarash of insistences that have been caused by domestic terrorists. on october 24, two skinheads were charged in a plot to assassinate obama. they were members of a group called the supreme white alliance.

right before the murder take place, we were taking the head of that group to court. this group was a splinter group. i can tell you from the testimony we brought out in court and from the dealing with these people that they weren't dead serious. they would kill president obama if they could. on december 16, before president obama was inaugurated, a marine from a camp was indicted for threatening obama. that was based on writings and his journals. it is full of neo-nazi and anti- semitic hate material. the very day that obama was sworn in, and white man shot and killed two black immigrants in massachusetts and plan to kill as many jews as possible, fighting for the dying white

race he said. we know not far from pittsburg, three police officers were killed by a white man who said that when he was arrested obama intended to compensated his guns. the incident go on and on and on. this is not just involving the threats to kill african- americans and jews, but also latinos. on june 12, executive director of the minutemen american defense went into a home, a home invasion come in arizona and shot a latino man and his 9- year-old son. the whole thing was a plot to supposedly robins family and take what ever it money they could get. it was very serious. the threats from why bring terrorists in this country is real.

-- from white wing -- right wing terrorists in this country is really will. the planes are being fanned by the news media. glenn beck of the fox news said that fascism is coming, the man is setting up concentration camps. rush limbaugh u.s. 600 regular -- radius stations and claim several manila and viewers said that fascism we must all be afraid to use the word. he is talking about the government of barack obama. michael savage says there'll be a wholesale firing of white men in the u.s. government. your guns will be seized in your free speech is gone. dick morris on fox news said those crazies in montana to say we are going to kill the atf agents because of the un, and

they are beginning to make a good case. similar words have come from members of congress of the net is this. i will not go through all of them. i will just mention one. paul brown of georgia. he suggested that obama might establish a gestapo security force. then he says, i'm not comparing obama to hitler. i'm saying there is potential. these comments, when unstable extremist stewing in their own 8 and raid, when they keep hearing their paranoia views of validated and reinforced by mainstream figures, is it any wonder that they pick up arms and do things like these other individuals? hate groups are on the rise in

the united states. a perfect storm is brewing for the build up of these hate groups. their 926 hate group said we of documented -- that we have documented. i cannot say that we have been able to identify everyone, because they do not register at the chamber of commerce. we know that their 926 letter documented. -- there are 926 that are documented. you can go on their website and you can see all these hate groups. there scattered all over the united states. those hate groups have a 54% increase since the year 2000. there are 186 groups that are affiliated with the ku klux klan.

it goes on and on. there are 113 black separatist groups, like the nation of islam his language is really no different than some of the hate groups that attack on the far right. they say jews are children of the devil. that does not reflect the views of muslims in this country. there are millions of fine citizens of this country. one of the most troubling things that we are seeing now is the re-emergence of the so-called patriot militia groups. at the time it timothy mcveigh, there were several hundred of these groups. the kind of waned. back then, they are focused on anti-government. they were against high employment interest rates, you name it. the re-emergence of the militia

groups and there are focused on racism, because the face of our government is black. they see an american -- african- american present. these groups are now becoming to merge with the other hate groups. hate web sites are feeding this frenzy. also on their website you can find the listings of the 630 web sites. when they began to investigate von bromm, they found that he was a frequent visitor of other website. david duke picked up on this anxiety and frustration and distrust and on is what said he could obama is a victory will

serve as a visual aid to whites, provoking backlashes that will result in dramatic increases in our ranks. on the national movement website, there was a picture of president obama with the cross hairs from the scope from a rifle and under that actor it said killed the n-i-g -- and you figure the rest. one size of the we need to search to the mexicans as across the border. -- 1 website said we need to shoot the mexican as we crossed the border. what is happening? i think it does not take a sociologists or expert on demographics to tell you that america is changing.

america is drastically changing. in 1970, when ours is getting started in the legal profession, only 20% of our population was non-wide. when i say non-white, i also mean on latino. now it is 34%. by the year 2014, the population will be approximately close to 50% of non-white in the united states diversity in is a great thing. i say many times in a speech to college that america is great because of our diversity and not in spite of it. diversity also brings with this serious issues of people getting along with each other. recent polls show that in a population where you have 85% in

low-whites, people trust their neighbors. polls show that when you have a very diverse population, 1/3 of different ethnic groups, the trust of one's neighbors fall substantially for no real basic reason. with diversity also comes the problems that we face. that is what we are seeing with these things. another thing that speaks for itself is that america has a black president. we have 250 years of slavery, 100 years of jim crow, and 30 or 50 years of brown vs. board of education -- all the conflicts in the civil-rights movement and now we have a black president. this is extremely unsettling to a large percentage of the population.

and then the thing that is happening in our country, the most of you know about by now, we are suffering from a serious economic decline. it is not as the decline in this country, but it is the decline in the whole world. this creates a lot of issues, fear, paranoia, and create those where the king for a scapegoat. -- create those who are looking for a scapegoat . \ the united states is losing its place as an economic leader of the world. we give serious competitors by china, india, brazil, and others whose the gdp will probably increase in this year's and our s will not.

please we have a place to sell our products. the world is frustrated that financing the deficit spending habits of the american consumer. those issues come together to make the problem in the whole world. homeland security, headed by a janet neapolitan no = = = = = = = = = = = = = = = nepal latinos -- they said the economic crisis has been a problem. they are exploring the economic downturn, revisiting the 1990 abolition movement, and of legal immigration. under illegal immigration they gave an example of six militia members arrested for planning to

machine-gun immigrants. the last thing mentioned was disgruntled military veterans. they mention timothy mcveigh. it went on to say that large numbers of potentially violent neo-nazi skinhead and others are now learning the art of warfare in the united states military. this report was ready to. pat robinson said that somebody was either a left winger or gay. you know the other criticisms. most of the criticisms were coming from the political right. it was not as the pat robinson's of the world. they were attacking the good men and women of the united states military. that is not what the report was doing.

those were disingenuous criticisms. this report says that there many people were going to be coming from the military from iraq, iran, and others in coming back home and not finding jobs, being frustrated, and very disgruntled. those people, not all of them, our prime targets for improvement by the radical rising organizations that i mentioned. the second point is report made was that we are training in the united states military individuals who already are involved in a neo-nazi activity. we see on hate websites suggestions that their members join the military and learn how to use c4 explosives and others.

they are saying, why not let the government trainees and you cannot buy the exposes anywhere else? today we issued in leisure. read a letter. we as a chairman of the senate homeland security, mr. lieberman, the chair the house committee on homeland security, bennie thompson, the letter was directed to carl and evan. i will read a couple of paragraphs from this letter. it was about 400 page bound report backing what we said is happening. it said in the wake of several high-profile murders by extremists of the radical right, we urge a committee to investigate the threat posed by

racially extremists kumbaya the training domestic terrorists. of will -- the whole letter. you can pick one up outside this room. it says we are not alone in are concerned. in july 2008, and get back issued a report indicating that the problem of extremists in the military may have worsened. according to very poor, since the sources reported to premised leaders encouraging followers who left a documented histories of activity and to do not have swastikas on the body to infiltrate the military as ghostskins. we go on and layout what the homeland security report says. just to indicate some of the things that we found, and we

gave the posting on a neo-nazi facebook page. i cannot think of the name. 40 postings of different individuals to claim that they are in the military, active duty, and one list a doctor helped blur as one of his favorite books. another posted -- one listed madofadolf hitler's as one of hs favorite books. these individuals go on and on on their web sites, posting their views. 1 then said he looks for to

killing as many bloody sand n-i- g-g-e-r-s as he could find. this is an issue that we hope united states military will take seriously. america is changing. with this continuing fury over the changing demographics of our country and the collapse of our economy and the backlash against elections, our nation is in a fragile state. we are not alone. npr reported last week that the global economic crisis also is fueling the far right politicians in the european countries. there are still signs of great hope. our latest election saw the

shattering of glass ceilings, whether defined by race or by gender. millions of americans crossed the poll lines at the ballot box. for the first time in our history, polls showed that both black and white people believe that race relations are generally good in our country. that is a major change. before that and before the election of president obama, about 75 serve of anglo-white in this country said that racial relations work. about 25 certification of blacks thought they were the. -- 25% of blacks thought they were good. that is a hopeful sign. americans are very optimistic about president obama and what you mean to this country.

there are undoubtedly going to be more acts of violence. i am convinced that we are not going to go back to the days that this country was when i was growing up in segregated alabama, the days that martin luther king founded the civil rights movement with the help of rosa parks and so many more people who put their lives at risk. as dr. martin luther king said in 1963, "the arc of the universe may be long, but it leans toward justice." thank you very much. [applause]

>> could you comment on the incident two days ago where 68 minority children were asked to leave the swimming pool and wear white parents pulled their children out of people? is racism alive and well in philadelphia? what i'm not the mayor that incident. it sounds like montgomery, alabama in 1965. it bears looking into. i cannot say who is right or wrong. i know that of white parents told the children of people because black students were in the pool, that is a strategy. in 1968, i'm getting old, i father lawsuit against a ymca because the city closes pools and pushed dirt into them. these were 20 pools. the court ruled the ymca had

built a large number of polls and facilities and cannot do as a private organization. that bears looking into. i hope the facts are different in your report. >> has the economic climate contributed to the recruitment of hate crimes? >> i've probably answer that question in my talk. clearly, we have seen a resurgence in the number of hate groups. you cannot always say the dire economic climate, but it is those who people perceive as causing the problem. the latino migration this country is the biggest engine generating increasing hate groups. 40% increase in crimes against latinos in 19 -- in 2008 alone. >> america has a long history of

domestic terrorism. if they have posted 1000 home from terrorist careers. why is the public interest in international groups, which is greater in their own land? >> i think the world trade center was quite a tragic event to take place. and lettuce into the war in afghanistan -- it led us into the war in afghanistan. that is when we were devoting billions of dollars and lives of young people. during the same time, there are agencies and our government that are tracking domestic terrorism and do a good job. they are not really ignoring them. they are here today. i will not indicate who they are. there are some officials of the justice department and they are on top of this on a regular and daily basis. i do not think it is going to be a serious problem, lack of interest. we do hope the united states

department of defense will deal with some of these issues with the government is using our taxpayer dollars to train future timothy mcveigh's. timothy mcveigh got his training in the united states army. >> to you think of the obama administration should establish an office of power -- tolerance? >> i do not think the president obama should have an office of acceptance and tolerance because of hate groups and their activities. i think that the whole focus of our government from state and federal levels should be acceptance and tolerance. i do not know in particular cabinet position is necessary, because all aspects of the government deal with this subject, whether the department

of housing, hud, or the justice department. we need to focus. we need a national mixed it up day. we have one of the law center or ask students in school to sit at a different table during lunch. sometimes black students it together, white, docks, whatever. it was the first time allotted you have the chance to cross the barrier. they take a step forward. would be good if president obama went down to the cafeteria of the white house and said down and talk to people? it should not be one day affair. it should be something that back when i was a boy with through trash of the window without thinking about it. when we are getting from the cotton field, i with their bottles and try to hit signs. i did anile -- did and now, susan wood stopped me.

we have spent a long time trying to clean up the trash on the byways of america. to mimic the indian that was sitting there in the trash is put anti had a tear coming down as i? -- if you remember the indian that was sitting there and the trash hit his foot and he had a tear coming down his eye? it is like that. 80,000 schools use a tolerance program. we need to clean of some of this hate that we have in this country. >> can you tell us more about the teaching tolerance program and why do not think it has become mandatory curriculum? >> there are enough fish to fry in a public education program. we do not need in a mandatory thing. just like we should not have to have a tolerance part of our department, that to be a thing as schools should work with, a

culture in the school but this posturing exceptions. -- posturing tolerance. -- fostering tolerance for the itt college program that is funded by the suppor. some people say, why do these tolerance? we used it by supporting the differences. that program has been an extremely successful program. we have videos. most of it is on line. it is available for anyone who might be listening today. >> cents obama, many say racism is an obsolete issue.

what can we do? >> when obama was elected, they said the we have a black president now we have an excuse. that is easy to say, but its allies in a lot of the truth and our country. we still live in a world of the applications. many colleges and other applications. many have an african-american sounding -- african-american sounding name like lakeshia. the other had an anglos on the name. the applications were identical. the lakeshia's got less calls because of the name on the application. 50%. these biases are built-in. they are difficult to overcome.

the election of obama is important in moving in the right direction. we recently had a twitter revolution in iran. we have a whole generation is changing. i do nothing will go back. it will be a long day before the country person's skin is not something that those are not the same color do not live at. i look up every morning and they are really ever lived in the mirror. i have a feeling that people of color probably think about the color of their skin quite a bit. that is where they are going in a storm people are watching them, whether there are going to a job application. i think this nation as gore to overcome these problems. there are those the not like is to do it. and rush limbaugh says that he hopes obama will fail. i hope that this nation wants obama to succeed. >> is there an increase in women becoming active in hate groups? are they being overlooked as

threats? >> we find that hate groups are pocketed primarily by men.

findings. robert green, thank you for joining us. host: we were talking about sonia sotomayor? tell us your thoughts. >> clearly, the obama administration is trying to slide her in. i don't know that her qualifications are as good as some of the others sitting there currently. republicans are trying to raise a stis saying liberal. i think they have a slim chance of doing anything maeningful in terms of protesting her nomination. host: should they? >> i don't think so. it's important to protest things that they don't like. i don't like a lot of her

decisions either but the reality is the numbers don't add up. cut your losses. host: healthcare is going on in the congress. >> so it is. host: do you like the direction it is headed? >> what do you think? i am not a big fan of the healthcare legislation being proposed. i'm even less a fan of the way it is being done. they are doing it in these private meetings. it's disappointing. they got some heated responses out of the audience. this is the kind of thing i like

to see out of president obama. the questions are predetermined, which was something he did last year. host: why do they need the republicans? >> good will. i know they have 60 votes now but that's not the end of the world in being able to form the consensus. i think it would be crucial to bring all sides to the table. host: why are you a conservative? >> because i think limited government is important to me. it's important to maintain basic hum avenue services, roads,

police sources, emergency care, sign me up but stop there. then let me live my life. host: talking to jillian bandiz. please call, the numbers are on the screen. host: what sort of position are the republicans in now? >> we still have to be vigilant

in terms of the new policies out there. we still have some fight in us. it's important to keep it up. host: in a poll, mit romney is leading and sarah is in second place. >> i think that's interesting to see who is in second place. i have a soft spot for her. i know not a lot of people do. her latest move kind of -- we are saying what are you doing? there goes our hero.

at the end of the day, we can trust her decision making. i don't think you can predict it. i'm going to try not to go there and say, i just in shara. >> i think every congress person should go on record. not a staff member or a cliff

note version should be put out for them to read. it should be done -- i don't care if it's 15,000 pages or more, we are talking about turning our healthcare into something that luke like canada or other countries. we need to hold president obama to his transparency with regard of five days of having that bill out there so every american can see what we are getting and not sliping 300 or 500 pages in in the middle of the night. >> ma'am,>(ñ when you read thatd

you understand what it means, let me know. republicans are getting 72 hours of reading the bill after it has been penned. you tell me if that's transparency? host: i have developed a couple of tweets. from john. does the guest believe that the republican party has become the party the white male, she being the exception? >> no. i think one of the fastest growing group is the latin know americans. we have a large number of african-american -- religious

african-american men coming over. host: if you want government out of your life, why would you be against a woman's right to choose? >> great question. i am more human rights. if that's men or women, black or right. i don't think that is anti-woman in the slightest. host: next to the phones. caller: i was wondering if the guest thinks that the republicans would do bet for

court the media. i know it sounds like something we shouldn't have to do but the reality is that the media is an element just like the element. certainly when george bush was rushing us into war, they were up on the gop and they lead us. the media is trying to pay pen nent for what they did. they admitted they played a roll. that was one question. the other question, is it a resent phenomenon that the congress does not rebuild or has it always been the case? how did we get things done in the past if they never read

bills? >> no. you don't haveíz to court me. i also don't feel like i'm paying pen nens. the media follows trends. you can certainly fault us for it. i encourage you to twitter me and tell me what you think i should be following. in response to your spekd suggestion, conditioning res does not always rebuild. i'm not sure of the time limit when congress stopped reading bills. i think it is probably when

bills hit 5,000-6,000 pages. host: going to the phone. caller: i have a question for the guest. she says sotomayor is not as smart to the other nominees. compare her background, ask she name one or two supreme court judges. number two, accord together record, democrats fight the republicans in passing the law at 95%; what percentage do the republicans cooperating with the democrats currently. thank you. >> i wasn't entirely clear with the first part.

the second in terms of the cooperation. i know for a fact that they regularly go to house and democratic leadership to make their own proposals. i think it is generally about the same. they fight for what they can and then throw in the cards. host: where in your view can the republicans take off support for the democratic yik party and obama? >> republicans are making strong in roads in cap and trade and the economy. they are making a strong impact in the gitmo release. obama was going to release the

prisoners into american prisons. the republicans rose up to stopz that. host: how is michael steel doing in your view? >> i can say there's certainly room for improvement. >> the last election when he was promoted, i'm not certain as to the mechanics of that. i'm looking forward to seeing

what he does in the future. host: on the republican line, good morning. caller: good morning. my question is, today, they plan on pushing through on healthcare. i have seen it on c-span. they are telling people to call through to their senators today. they are not going to have time to read it. they will pass the stimulus and everything else. the republicans are not even going to be able to read it. what i don't understand is with us being in such a crisis and the economy being so bad, how

come they have to fight so much, i don't comprehend it. to me, they ought to be trying to solve the problems and help the people. that's what they are there for. >> that's part of the problem with forging ahead. simply raming things through is not the answer. a little more time and review and legislation. asking why they are stalling and launching regulation, it's important. voicing your concerns to your local representatives. host: where did you grow up and go to school? >> i am from tampa, florida. i am an alum of university of

north carolina, chapel hill. go heals. host: how long have you been with town hall >> i have been lucky to be here several years. host: were you active in.qt politickses in school? >> i was active in discussions host: we'll go to the phone. democrats. caller: yes, i have a question about -- you made sort of a comment aboutal fran kin. it looked like from your expression, you were happy.

i wondered how do you feel about what's going on with senator and the governor from south carolina? and also, you want less government. i was jus curious if you voted for bush last election. i'll hang up and thank you very much. .

guest: if they trust in stamford, then by golly, i will, too. host: by using that private peter by public officials should be cause for resignation? guest: host: because, -- guest: because, especially on the republican side, we have faith and family and we have totter those things for so long. and that is not to say that democrats do not have those things as well, but the level of emphasis we have placed on those issues, we could do a bit better job of making sure there are no sub-skeletons in our closet. -- there are no skeletons in our closet.

host: next call from montana. caller: i went and looked at the dot and the contracts that have been awarded on a daily basis and there was scope shocked -- and i was so shocked. new drugs can of believe the money that is being awarded on a daily basis. -- i just cannot believe the money that is being awarded on a daily basis. it is a very interesting sight, if you can weave your way through the technical. and that is hard cash, of course. host: plymouth, indiana, bobby, republican, good morning. caller: i have been a lifelong republican, one of those

extremists believe in the bible and guns and of the -- of that stuff, so i have already been labeled. i believe that the republican party has got to go back to its roots. george bush was not micamy kindf republican. because our republican party is trying to appease everybody, almost like ça chameleon. just like you mentioned earlier, the hispanic vote, the african- american vote, those are racist statements. let's not put on and asked for this party or that party. let's just be true americans. let's say that the borders must be defended. let's follow the late -- the law of the land. and let's tell people, no, we cannot afford it. sarah palin would be a perfect example. i also think that newt gingrich would also be a wonderful republican nominee for president. the question i have is, why did

the republican party that i sat and voted for for eight years allowed the borders to be open and illegal immigrants pouring across the country, why did they not defend our borders? if you can answer the question, that is the million-dollar question for the day. guest: thanks, i will look for your check. first of all, thanks for chastising me with regard to the demographics. is important to recognize that it does not matter where your base is coming from. and now, he is giving me that grin. [laughter] i do agree with you that it is important to recognize or your principles are and not worry as much about who your people are. yes, sure, republicans have had a history of anchor -- encompassing non-minority demographics. but at the same time, but that does not mean that our ideas are any less value.

second, on the immigration question no, i do not have an end-all solution. i can tell you that increasing border defense has been a welcome the moment in my view and if we can continue on that track and create a meaningful program to register and track the immigrants that have already crossed into our country, then we will be a lot better off than where we are now, which is in a pretty bad place. host: time for another couple of calls and another tweak. -- tweet. guest: i would like to ask the cosmic rat where he gets his paycheck from and who pays his rent because, if it is the federal government, but i think it says that all right there.

governments do not make money. people make money and a way that people sustain themselves on a day-to-day basis, it is through cold, hard cash. if that is appalling to you, but i do not have much to say. yes, you need some regulation in some situations, but the degree to which creating new regulation and overburdening the economy with it is just obscene. i cannot understand you would say at this point that we are unregulated and we do not have enough private industry. host: a couple of other sort tweets -- what does she what does"c" street -- what does she know about "c" in washington? that is the house where christian conservatives are living. guest: i have heard about this and i was familiar with this idea of a convent, if you will,

of republican and men in congress -- republican men in congress who was published in hong kong might fuel for themselves. there have been jokes about it, but i do not think that -- to have established a home for themselves their been about, but i do not think you have to assume that it is anything bad. i think we have done more for the country of iraq and the media gives us credit for. sponsored elements are 20 in net benefit to the iraqi ben of -- are going to be a net benefit to the iraqi people. host: last call from connecticut. caller: it is interesting to listen to your logic. i have been watching the republican party self-implode on

their great plan. they came up with the most brilliant plan in the '80s, if you just go around telling everybody you are with god, jesus, the democrats are going to take your guns away and you are against abortion, youç get all of these votes. but they have failed on the fronts, especially with their own moral character. it seems like it has become more of an achilles' heel. now, i think the party is ruined. i do not see how anybody could trust them. i do not trust the democrats either, that is why i am independent. i just think they should all go. guest: well, if they could all go, i think i would be on board with that for a while. if august recess the could just go permanently. you seem to be pretty cynical to

awards of the washington establishment and i think it is -- towards the washington establishment and i think is justified. i think gramm's are committed by both parties. i cannot agree that we are going -- i think crimes are committed by both parties. i cannot agree that we're going down about bass. -- that fast. i think you have to work from within the establishment and within your organization to >> we were talking about polls. there's another new poll out commissioned by c-span about the supreme court. rob green of 10 polsteres. one of the questions we asked is

can you name the individual chosen by president obama to serve on the supreme court? 43% said sonia sotomayor. another question asked is if confirmed, what would be historic about her? caller: impressive again. 66% would say that she would be the first hispanic nominee.

why do you think the high awareness is there. there's been a good deal of news about it. it's always a 2-way street with information like this. everything from property rights to civil rights. because this is so important, they follow with interest. host: before we get to the larger question of the supreme court, another question we asked about was the first woman nominee. this was sandra day o'connor. 59% did not know it was her. did that surprise you?

caller: she remains a very important figure and served for, i guess, a little over 20 years. was struck by that. i thought it was interesting that there's even greater awareness of sotomayor. host: what does that tell you? caller: just that there's an enormous interest in her nomination. host: what did you find when it came general knowledge about the preem court? iks in some respected, the public. the voting public and the broad

aspect. there where some other choices as well. >> can you name any justices on the supreme court? only 46% say yes. caller: that's interesting. where we started to see a slide

they were certainlily aware that it is a life-time term. >> you talked a little earlier about the supreme court and how americans understand how the supreme court does make a difference. how many could name a case? caller: there's really only one case that could be decided. that's roe v. wade. and a distance second is brown

v. board of education. yes. people were free to cite any case, really basically all the understanding was around roe v. wade. host: and what do people think about cameras in the courtroom? caller: i should say, strong support for cameras in the courtroom. host: did you find out why? >> we learn that there's some high school civics aspect of the court that these justices sit essentially for life. we knew that. we sense a real hunger about what's going on in the court.

we have the interest in the sotomayor nomination. what's driving the support for more televised coverage is -- the best way i can describe that is telling you the considerable interest in her nomination. host: tell us about the methodology. >> we conducted a survey on line on tuesday this week. this is a cross sample of american voters. host: tell us about your firm. >> we are a well-known research

based consulting firm. in particular in the united states, we work with democratic

in the interest of time, i will submit my full statement for the record. 111 members of congress who serve on these two committees. and i know many of my colleagues who are attending today's hear having questions of the secretary. >> and it looks like the hearing is under way so we're going to bring that coverage to you live right now. the agriculture and financial services joint committee hearing. >> several of their key

provisions regarding over-the-counter derivatives are similar to what the house agriculture committee passed earlier this year as part of hr-977, which would strengthen overside of futures, and over-the-counter markets. however, the devil is always in the details, and i look forward to hearing additional details about the administration reform ideas, and i hope secretary geithner's appearance will get us into the weeds on how this will work. i now want to yield two minutes of my opening statement to a member of both the agriculture and financial services committee who has done a lot of work and has some knowledge in this area. the gentleman from idaho, mr. minnick for two minutes. >> chairman peterson and frank, i am a farm boy who grew up skeptical of wall street wondering how a loaf of bread could cost a dollar when it contained only a few cents worth of wheat. i also spent over 20 years as the ceo of substantial companies which relied on wall street and used customized derivatives to hedge currency and interest rate

risk. i learned these financial instruments are essential to the proper functioning of our 21st century economy. i have listened to many experts and studied the administration's 84-page concept paper. if we tor craft a regulatory structure which can keep our nation from ever again repeating the financial excesses which brought today's economy to our knees, we have toive serious consideration to the fallen reforms come which go beyond those proposed by the administration. first we should merge the s.e.c. and the commodities futures trading commission. financial derivatives, whether they originate -- >> excuse me. we do hold -- one of the members on the republican side point out the acoustics in this room are terrible. now i think when ways and means holds in the room, they consider that an advantage. but we are here not marking up a tax bill, but having an important public hearing. so we are going to ask everybody to speak fairly loudly. particularly you, mr. secretary,

because while i can't see you, i would like to be able to hear you. mr. minnick may resume. >> first, we should merge the s.e.c. and the commodities futures trading commission. financial derivatives, whether they originate in a commodity, a security or neither like weather futures, are functionally identical and must be traded, cleared and settled subject to the same rules. bifurcated responsibility might be made to work temporarily, but is a poor long-term solution which will discourage boeing bold action when crises arise and will encourage regulatory arbitrage. second, banking regulation should be removed from an already overburdened federal reserve and the remaining three federal depository institutions regulators, the ots, the fdic and the occ should be combined into a single federal bank regulator, which should also be given broad consumer protection responsibility and resolution

authority for both banks and all other entities deemed systemically risky. powerful global institutions like citibank and bank of america or aig should not be allowed to shop for the weakest federal regulator. finally, the proposed systemic risk oversight console should have the highest quality permanent staff is f it is to respond appropriately as future dangers arise. because the federal reserve is more institionally independent than executive branch agency and has increasingly global responsibilities, that staff should be housed in the fed and the counsel should be chaired by the fed chairman. i thank both chairs and yield back. >> i thank the gentleman and just for clarification. the gentleman spent a lot of time looking at this, but mr. frank and i, at least the two of us, have come to the conclusion we're not going to be merging the s.e.c. and the cftc, but we

appreciate the gentleman's comments. i want to recognize my good friend and the chairman of the financial services committee, mr. frank. he and i have gotten together and we have a good working relationship. and we think are close to having a consensus on where to move with this. and you can see by this hearing today that we have a good cooperation going on between the two committees. mr. frank? or excuse me. i'm sorry. i am supposed to recognize mr. lucas. i'm getting ahead of myself. so i didn't mean to overlook you, mr. lucas. my good friend from oklahoma who worked with us to get hr-977 out of the agriculture committee last february. mr. lucas is recognized. by the way, we're going to limit people to four minutes. because of all of the members that are involved. we would hope that everybody would abide by that. mr. geithner, we're not going to hold you to four minutes.

we want to hear what you have to say. mr. lucas? >> thank you mr. chairman and thank you to both chairmen for holding this to hear the treasury's proposal as well as examine the legislation that the house agriculture committee passed a few months ago. as ranking member of the house agriculture committee and senior member of the financial services committee, i would like for this occasion to examine the issue from two different perspectives. the agriculture committee has been active in exploring the role derivatives play in the glaerkt place and overall economy. the committee has held numerous hearings to gain further information and insight into the complex nature of credit default swaps and how they should be regulated. in february of this year, as the chairman noted, the ag committee passed hr-97 7. the one can argue the consechts transparency and accountable birkts we must make certain our actions call for an appropriate level of regulation that will respect the nature of the marketplace and encourage

product innovation and economic growth. derivatives do serve a valid purpose in the mark dlet place when used with judgment. they are essential for managing risk. we must consider that there are numerous industries that have legitimate price risk and there must be a way to mitigate that. derivatives provide legitimate means for managing that risk. the financial problems that we have seen recently are not the result of merely the existence of derivatives but there are problems in measuring their true performance or knowing with certainty the depp'ing and breadth of the over-the-counter market or knowing with confidence the credit worthiness of the counter party. simply put, the marketplace can be protected from market failures, if regulators are fully aware of the threat. ignorance of this relatively new financial instrument caused much of the financial failures. we now know these complex markets need better models and methods for oversight and transparency. however, we must be careful not to overreach and force business

into very expensive clearing operations that cost capital they do not have or force them out of risk mitigation altogether. then business will be forced to manage risk with higher prices which will ultimately be passed on to consumers. the need to avoid artificial costs for business was the reason i opposed the clearing requirement in hr-977. there is considerably concern that section 13, as currently drafted, which relates to the clearing requirement will stifle innovation in the over-the-counter market. cftc needs more authority to weigh the clearing requirements in section 13 so that new and safer products can get to the market in a timely fashion. this would recognize the fact that not all contracts can be cleared and that there is a need for customized contracts. these are just a few of the concerns we have on my part as we move forward today. again, i thank you for the opportunity to discuss the issues regarding these important financial institutions and secretary geithner, i look forward to your testimony and

the answers to the questions posed by the panel. >> i thank the gentleman. now i'm pleased to recognize my good friend, the chairman of the financial services committee, mr. frank. >> thank you, mr. peterson. and i begin with an apology to our friends in the media. there is no fight to cover between these two committees. i know that's an easier topic than the complexities of how actually to do something. but i believe that the besetting sin of the house of representatives is jurisdictional fights. and n which our egos get in the way of good public policy. i am very proud that chairman peterson and i and other members of our committee, as well as chairman ginsler and chairwoman shapiro have made very extra special efforts to avoid that. and i believe we have achieved that. and there will be some

disagreements, but they will be based on substance. there are some areas where there were no disagreements. clearly, we will be significantly expanding the regulation of derivatives. and i want to address the issue that was raised by the very thoughtful gentleman from idaho, with whom i agree on most issues, not on the question of the merger. i will say if we were starting from scratch, i don't think we would have the current organizational structure. but we're not starting from scratch, and i don't think it is practical to talk about making those major changes. but i also say this. there have been some complaints that in what the obama administration has proposed, and i think they have a great deal of credit coming to them for the initiatives they are taking and a broad range of financial restructuring. and some of what we are talking about. some people complain there's not enough structural change. frankly, i think that's the wrong issue. what we should be held accountable for is making substantive changes in the

rules. who does these things is less important to me than what's done. and by the time we are through in the collaboration between these two committees and the work of the congress as a hole and the work the financial services committee and others will, do we will, i believe have substantially increased the authority of regulators to deal with these things. we have within our jurisdiction the question of hedge funds. i believe that hedge funds should be required to register. we will be talking about further expansion derivatives and undoing some of the decisions not to deal with them in the past. we will be talking about a number of other areas where we will be making some important substantive changes and giving the regulators the authorities to do things. with regard to derivatives, clearly the gentleman from oklahoma is correct. they play an important role. the problem we have is this. the role of the financial sect sor to be an intermediary between people who are engaged in the productive activity of

the economy and people who have the money they need to do that. the role of the intermediaries is to gather up money in reasonably small amounts. one of the problems we have seen in the past couple of decades. activity that is a very important means to the end of productive activity has become for some in our society an end in itself. our job is to try and separate those things out. where we have instruments, activities, entities that are an important means to gathering the funds that our private sector economy needs to do productive activity, we need to protect that. we need to make sure it's done with integrity. we need to give encouragement to investors who may be afraid to invest. that's why i regard sensible regulations very pro-market. you protect the people with integrity from those who might try to cut corners.

you give some encouragement to those who should be investing. our job is to reduce the extent to which there are things that go on for their own sake. i believe we're capable of doing that and i'm pleased chairman peterson and our committees lawyer on the way in cooperation with the administration to adopting such rules. and i now recognize the ranking member of the financial services committee, the gentleman from alabama, mr. baucus. >> thank you, mr. chairman. as the chairman of the ranking member of the agriculture committee have said, derivatives serve an important function in the market. they allow -- i don't know what -- they allow thousands of company companies -- >> i'm going to start over, if i

can. thank you. does that work? >> it's working. >> all right. as the three gentlemen said, they allow us to hedge risk to deplore capital, to lower their cost and to offer protection against fluctuating prices. i'm not sure what -- derivatives are about shifting risk and my greatest concern is that we do not want a system, and i fear that the administration is going down the path of shifting that risk not to the investors or to the dealers, but ultimately to the

taxpayers. the companies -- the four companies that will deal in these derivatives, over-the-counter derivatives the most will be four or five of the largest companies, financial companies in america. all of them will be deemed to be systemically significant. part of the administration proposal is for when these companies get in trouble. and one reason they could get in trouble is trading in these over-the-counter deatirivatives because they can protect against risk, they can lower costs, but as we saw with, i guess, enron, as a great example, they can take both dealers and investors down. and when that happens, i would like some assurance that the taxpayers are not going to ultimately be the ones who assume that risk.

that's not what we ought to be about. last september, leading up to last september, a lot of people made investments. they wrote over the counter derivatives. they made billions of dollars. profits on the way up. but when things turned down, who was asked to come in and backstop them? who was asked to take the risk, to suffer the loss. it was the taxpayer. now i personally believe that we ought to allow corporations to continue to write customized derivatives and that, yes, the government can look at them, but i -- another thing that we ought to consider is the government the best party to judge risk? and i say no. i think the government has a very poor track record,

regulators, of identifying risk. are we going to leave when we start having standardized trading of over-the-counter derivatives, particularly the more complex one, and the regulators bless those trades, or say that they are safe, are we going to attract a whole new generation of investors who think that i are investing in a safe security or future? we found with freddie and fannie that people began to think it was an implied government guarantee. and they invested in those stoc stocks. we need to totally avoid any implication that because the government is going to regulate these markets, they are going to ensure these markets or backstop these markets.

and i would like some assurance from the secretary of treasury that we ultimately decide the level of regulation. i look forward to the memorandum of understanding between the fed, the cftc and the s.e.c. but that ultimately, the taxpayers do not come in and take the burden and the risk and the costs of over-the-counter derivatives gone bad. thank you, mr. secretary. >> i thank the gentleman and i thank the members for their attendance and the chairman and ranking members for their statements. mr. secretary, we appreciate you being with us. we look forward to your statement, and members, i guess we have votes maybe coming up at 10:30 but we'll have time for the secretary's statement and

maybe a couple of questions. secretary? >> thank you, chairman peterson and chairman frank and ranking members lucas and baucus. and i'm grateful for the chance to come before you today. and i want to compliment both of you and your colleagues for already doing so much thoughtful work in trying to lay the foundation for reform and for bringing this basic spirit of pragmatic cooperation, tran skending the clax institutional differences that have made it harder to make progress in these areas in the past. now before i get to the subject of this hearing, which is the important need to bring comprehensive oversight and regulation to the derivative markets, i want to make a few broader points about the imperative of comprehensive reform. there are some who have suggested we're trying to do too much too soon. that we should wait for a more opportune moment when the crisis has definitively receded. there are some who are beginning to suggest we don't need comprehensive change, even though the costs of this crisis

have been brutally damaging to millions of americans, to hundreds of thousands of businesses, to economies around the world and to confidence in our financial system. and there are some who argue that my bye making regulations smarter and stronger, we will destroy innovation. and there are even some who argue that we should leave responsibility for consumer protection for mortgages and consumer credit products largely where it is today. now in my view, these voices are essentially arguing that we maintain the status quo and that's not something we can accept. now it's not surprising that we're having this debate. it's the typical pattern of the past. as the crisis starts to recede, the impetus to reform tends to fade in the face of the complexity of the task and opposition by the economic and institutional interests that are affected. and it's not surprising because the reforms proposed by the president and the reforms that your two committees are discussing would substantially alter the ability of financial

institutions to choose their regulator, to shape the content of future regulation and continue the financial practices that were lucrative for parts of the industry for a time but ultimately prufd so damaging. but this is why we have to act and why we need to deliver substantial change. any reglaer to reform of this magnitude requires deciding how to strike the right balance between financial innovation and efficiency. on the one hand, and stability and protection on the other. and we failed to get this balance right in the past. if we do not achieve sufficient reform, we will leave ourselves weaker as a nation, weaker as an economy and more vulnerable to future crises. now one of the most significant developments in our system during the most recent decades has been the substantial growth and innovation in the market for derivatives, in particular the over-the-counter derivative market. because of this enormous scale and the critical role these instruments play in our markets, establishing a comprehensive framework of oversight for

derivatives is crucial. all the derivatives bring very important benefits to our economy by enabling c,,)k failures by the credit rating agency. these failures enabled a substantial increase in leverage both outside and within the banking system. inadequate enforcement authority and information made the system

more vulnerable to fraud and market manipulation. and because of a lack of transparency in the otc derivative markets, the government and market participants did not have enough information about the location of risk exposures or the extent of mutual interconnection among firms. this lack of visibility, magnified contagion as the crisis intensified, causing a damaging wave of dereferaging and margin increases, the clax margin spiral, contributing to a general breakdown in credit markets. these problems and derivatives were not the sole or principal cause of the crisis. they need to be addressed. our proposals for reform are designed to protect the stability of the financial system, to prevent market manipulation, fraud and other abuses, to provide greater transparency and to protect consumers and investors by restricting inappropriate marketing of these to unsophisticated parties. this proposed plan will provide strong regulation and transparency for all otc

derivative products both standardized and customized and strong provisions for all otc derivative dealers and other major market participants in these markets. we propose to achieve these goals with the following broad steps. first, we propose to require that all standardized derivative contracts be cleared through well-regulated central counterparties and executed either on regulated exchanges or regulated electronic trade execution systems. central clearing makes possible the substitution of a regulated clearinghouse between the original counterparties to a transaction. and with central clearing the original counterparties have no longer credit exported to each prpth they reaccomplice that with credit exposure to a clearing house backed by financial safeguards established through regulation. second, we propose to encourage greater use of standardized otc derivatives and thereby facilitate a migration of the otc derivatives on to central clearing houses and exchanges.

we will also require, and i want to underscore this. that regulators police any attempts by market participants to use customization to avoid custom clearing and we will impose higher capital and margin requirements for counterparties using customized and noncentrally cleared derivative products to account for their higher level of risk. third, we propose to require that all otc derivative dealers and all major market participants be subject to substantial supervision and regulation, include appropriately conservative capital and margin requirements and strong business conduct standards to better ensure that dealers have the capital needed to make good on the protection they provide. fourth, we propose steps to make the otc derivative markets fully transparent. relevant regulators will have access on a comprehensive basis to all transactions in open positions of individual market participants. the public will have access to data on open positions and to

bring about this high level of transparence ewe'll require the sec and cftc to keep recording requirements, including an audit trail on all otc derivatives and to trades and to provide information on all otc derivative trades to a regulated trade repository. fifth, we propose to provide the s.e.c. and the cftc with clear unimpeded authority to take regulatory and civil action against fraud, market ma nip ulg and other abuses in these markets and we'll work to tighten the standards that govern who can participate in these markets. and finally, we will continue to work closely with our international counterparts to ensure our regulatory regime is matched by similarly effective efforts in other countries. for these are global markets and these standards to be effective have to be applied and enforced on a global basis. with these reforms, we will bring protections that exist in other financial markets,

protections that exist to prevent fraud and manipulation in other markets and to preserve market integrity to the otc derivative markets. the s.e.c. and cftc will have full enforcement ability. firms will no longer be able to make arrangements without adequate capital. no market would escape oversight and we'll bring the risk reducing and promoting benefits of central clearing to these important markets. now turning these proposals into law will require complex, difficult judgments. and some of these judgments will involve assigning jurisdiction over particular transactions and particular participants to our regulatory agencies. i want to say we've been close to -- working closely as you have with the s.e.c. and the cftc over the last few months to develop a sensible, pragmatic allocation of duties and have made very substantial progress in narrowing the outstanding issues. i want to join the chairman in complimenting chairman shapiro

and chairman ginsler for working productively and closely together. as congress moves to craft legislation we are working to advance the overall process of reform. just as an example, we provided detailed legislative language for the establishment of the consume procedure techs agency to the congress just last week. the s.e.c. is moving forward with new rules to govern and reform credit rating agencies. and the cftc as you saw announced hearings yesterday on whether to impose limits on speculation in energy derivatives in order to dampen price things and to require new disclosure by derivative traders. those some are examples of things we're doing as you move ford consider legislation. we welcome the commitment of these committees and of the congressional leadership to move forward on legislation this year. this is an enormously complicated project. it's important we get it right and we share responsibility for fixing the system and we can only do that with comprehensive reform. i look forward to answering your questions and talking through the range of important complex issues we face in the reform

effort. thank you, mr. chairman. >> thank you, mr. secretary. and we have about, i think, eight or nine minutes for a vote. i'm going to go ahead with a couple of questions here. first of all, we, in our bill, you know, we propose mandatory clearing. and if they can't be cleared, then w give the cftc the requirement. they put some margin in collateral requirements on the transaction. one of the questions that i still have, you know, aparentally you're not ready to give us a detailed response on how this is going to work. but, you know, you mention the broad definite of standardized or presumption of standardized have cleared and high volume will be an attribute of a standardized contract which, for me, kind of just raises even more questions about what's going on here. so while you may not be able to give us detail of what a standardized otc derivative is

today. can you tell us to what degree of certainty will a swap dealer or end user of derivatives be able to know going into a swap whether it's going to be classified as standardized or customized? will the answer be in the statute itself or a regulation promulgated by federal regulators? will clearing houses be providing answers based on if they choose to clear the derivative or not or will the market as a whole show the way based on volume of the otc derivative? and how much confidence will market participants have beforehand whether the otc derivative they enter into will be judged standardized or customized? >> mr. chairman, of course, we want to have -- we want to give people as much clarity as we can. i don't think we've made a final judgment about to what extenty to wee want to define those standard of standardized in statute or regulation. my suspicion is what we'll recommend is we lay out broad principles and statute and have them defined with more clarity

in regulation. i think the important thing is that again that we move the standardized on to central clearing but we establish comprehensive enforcement authority, comprehensive transparency, comprehensive reporting sufficiently conservative margin and capital requirements across the entire market. and to avoid the risk that our definition of standardized is arbitraged. that people try to get around that definition and design customized products to escape the protection that comes with it. we are going to propose to put higher capital requirements on the customized products to limit that risk. the basic -- the basic design of this proposal is to make sure there is comprehensive oversight over all transactions in these markets and comprehensive authority to the s.e.c. and cftc to police and deter fraud and manipulation in those markets and to make sure there are appropriately conservative capital margin requirements across those instruments. >> thank you.

what about -- what if the clearing house determines there's too much risk, too little profit in clearing some standardized otc transaction or what happens if no central counter party will clear a standardized contract? or do you think the central counterparties should be required to take on this business? >> haven't thought through that, but i don't think that's likely to be a significant risk. i think the economic instruments of the participants will encourage central clearing. as the markets become more standardized, it's more economic and compelling and efficient for a greater share of those products to move into central clearing. i think both sides of the parties will be -- particularly the users of those markets will have an interest in seeing that. but that's something we'll think through carefully with you. >> thank you very much. i think we're going to recess the committee and go over and vote. i don't know how many there are. but we'll come back

test test

>> let me ask you, specifically about one area that is of considerable concern to me and others. you've told us the s efrp c is working on how to divid up the system. when this division is finalized does the administration intend each area will exercise exclusive jurisdiction over each area. i hope it would be built into the legislation as well >> good question. i would say probably because of

the precedent established, that's probably what we will bring. until we see the full package, i don't want to get ahead of. i see you have the same problem i have with this process then. i agree it is on the substance and detail. we do carry the burden of carrying with you so you can consider those recommendations. we'll deliver on that recommendation >> when we propose the recommendations on how to solve these questions, a necessary part of the question will be in response to the question you

raised >> thank you gentlemen. a reminder that we marked our billups and pass it had in february under an open process. it's been out there since then. we request assure you we are going to continue that open process we are beg as open as we can be. >> would that be an indication that we might have a hearing itself? >> of course. i'm puzzled by the argument that it's premature to have a hearing. i would think this would be seen as a useful part of theey proce >> if that is coupled with a

follow-up hering on actually what we are going to do, >> i must say, that's an odd accusation that now -- it's a decision. i have never done that. suggesting it is something good to be premature. i now recognize the gentleman from california. >> thank you very much, mr. chairman. as you know, i have been talking a lot about credit default swap.

>> i remember what you told me the last time we talked. you told me if we ban the swap, they will just emerge in another way. basically what i'm reading from your testimony is that you think credit default swaps are necessary this country did very well without them for a very long time. j not ban credit default swaps?

>> the principal risk said to the fact that these road a lot of commitments. we are proposing to address those two critical features. this country has decades of experience they provide an important economic function helping companies and businesses from across the country better health our risk. that's the package of reforms we propose. >> you talk about all these

steps it will take in order to advise,e the credit default swap.

>> thank you, mr. secretary. >> on more than one occasion, you've said we are not going to make the system stronger by banning products. >> i think this is true that in the consumer credit area, where we have seen terrible disconduct. we expect them to prodescribe certain kinds of marketing practices. that's an approach that comes from other areas before.

congress put in place these helpful reforms to ensure the integrity of market functioning. >> mr. secretary, they would be allowed to ban products though >> there would be some consumer practices we believe should not be admitted. we believe the congress should govern. jo we are going to propose you legislate the framework and standard. that's a responsibility you

would have to set initially. >> you've said you don't believe in banning products but you would limit products that are dangerous for consumers. i think that's a good way to frame the delimba. we should especially courage more sim policity so the consumers have a choice of a

more accessible, easier to understand significance. they present an option to adopt or embrace a different type of product. >> who would review the authority over the consumer finance protection agency? >> guys, i'm not a lawyer. but my believe is that the congress is accountable. >> would we have to prove their actions? >> no, not that basic relationship. >> let me ask you something else.

back in 1998, i'll just ask this, larry summers testified in the snat against the notion of regulating derivatives. even small changes could throw the whole system out of whack. there's been dramatic changes. even though as i said in my testimony, the failures were not the principal cause of the

crisis. that shows substantial reform. do you still share concerns? >> the proposal the president laid out, my judgement about what's appropriate given the risks seen by this crisis. >> the gentleman's time is expired. the chairman from4 iowa. >> thank you both for this hearing. >> you are well aware that the market price of the agriculture has been vol till. experts tell me the population is growing by 98 plus million per year. food is important.

>> i'm getting frustrated. let's review this. we all ought to be involved in making this a success. it's time to get together. let's review and go back. last administration $700 billion was asked to keep things up. the fed did $800. that's $1.3 trilian. folks across the aisle are saying, look what you've done to us. horse feathers. we have to get well. we ought to all be hoping and praying we can make this thing

work. >> thaufshg, thank you. we have the opportunity to hear from you and have a dialogue. i'm going to ask you questions and ask you to respond to the thoughts i have on this topic. most banks didn't contribute. my bank will ultimately face my

constituents the uncertainty is clearly there, the fd ifrp c insurance premiums have increased. we now hear of a new consumer product safety and i'll stress that the banks we have at home,en ganged in reporting to wall street. this is direct upon the economy. i've had this conversation with officials at the fed. while the federal reserve has hope of encouraging of consumers to boor row money and consume, the regulatory requirement

ultimately, the increasing cost of business. many of the things in the recurring financial system is four. the increased cost of business means we are spreading the cost a much as we can. my point is that while it is damaging to my bankers, it's

ultimately damaging to their barrows. i appreciate any response. >> recognized. it's >> it is not just too much risk, very responsibly that's why it is very important.

that's the basic rational in a crisis to make sure you do enough support of the economy to get back on track. i believe the principal bank supervisors are carefully managing those.

>> inlt duced a bill calling for a pilot program to execute interest rate swaps on a transparent execution platform. people perceived he was from chicago. i was from charolette, the banking side guy. we came together on this notion that that was a good thing.

i note that that's an important part of your proposal this year. i want to ask you two questions about it. this is not a clearing house or an an exchange. it's something before you get to that. it seems to me the regulators could already be mandating this part of what you have proposed in legislative form now. the first question is -- do you see that the regulators control of currency and other regulators are really pushing that notion to your satisfaction even before this legislation is passed. number two, i've been some what

disappointed that we have some what control over fanny and freddie, no direction has been given to them to use these trading platforms. i'd like to have your assessment of whether you think that would be a good idea and when that might be in the works. we need to get the broughter legislation in place.

i do believe that the economic benefits that more exchange from traded product also be compelling to the users in these markets. once the framework is collarified you are likely to see much greater use of those kñ

platforms. >> i hear you talking about margin requirements. in traditional commodities, the clearing houses set the margins for clearing those transactions, the legislation has adequate capitol for the activities they

are involved in.

for those products not center rally cleared, this is very important that there is capitol margin against the risk of those positions >> again, i think you'll have a bunch of different entities in this market. we want to make sure there's going to be a come your honor approach.

how would you -- what kind of coordination needs to]vb happen

that's the way to think about the economic difference between them. >> thank you. now recognize chairman of the litsch stock and dari subcommittee from georgia, mr.

scott. i have a concern that this could create a source to meet a requirement jo you are right,

that would be a subject both to us and other people. maybe i could respond this way. making sure the major participants in this market be held to more exacting standards to leverage capitol in the future. that's one way you both view in ranking members have pointed;cxt >> you need to have risk, where risk is taken. barrowing short term and taking shorter term risk. if you don't apply uniform set

up, oil as you know is globally traded. the price is set not soully by activities in the united states markets but other markets.

looking for ways to limit vol tillity. it's hard to not miss the past two years. even though there's been important shifts

>> so have other countries taken steps or have there only been promises or loose commitments? >> i apologize. myself. >> i will announce that the secretary has to leave about 1:10 or so. if that's the case thashgs will probably be the end of this. i encourage members, even though we set this 4:00 minute limit,

we'll try to get through as many members as we can. gentleman from obama, mr. rogers. >> a large tractor firm told me he has opened new stores in the south but has completely lost confidence and is not opening up anymore. he's had to layoff 250 employees and cut hours for others. >> another company mettle craft.

they can no longer get capitol to work. i hear those stories all around the district. people are scared to death.

>> we do not yet have an economy that's growing again. i think that under scores in the examples you pointed out, that under scores the importance of this government to do everything we can to mitigate those pressures. they are starting to get some traction. you are absolutely right to emphasize that we have a ways to go. again, families÷ across the country feel enormous financial strength. >> what time line is a while.

you have already seen a substantial% it is going to make a point. tightening of spending and a greater rate of saveings is a ridgy rate in our countier. we are spending up here like drunken sailors and it's all barrowed money.

>> i think what we should do is tap when a member has 30 seconds left. next time for questions, if you hear the one tap, that gives you 30 seconds. next is the gentleman from new

york >> i learned there's always a question in going forward. there are two concerns i have and i give examples of. for example, many small businesses use derivatives that possess no systemic risk to the system. many of these may opt out of hedging and interest rates and currency risk if more change is brought through. they can no longer customize thñ

requirement. >> that's quite unlikely. we are prefshing the ability for small business and large businesses to engage the event that the product doesn't comply.

>> let me ask this question. there's concerns that pushing all der rif tiffs would create the monopolies. i want to be clear. we are not proposing to force all per i have tiffs. the changes and more that happens creates a more stable

system. >> the gentleman from new jersey, mr. garrett. >> your opening comments to the tune of those people who feel we are moving too soon. >> i appreciate that. there are people here that think maybe we don't want to move too soon and we do want to be

thoughtful. >> to a point i think you and i agree with, some people demonize these things. do you think they play a valuable roll? >> always in the front page, the

aig situation the underlying problem there was what? mortgage backed securities. those incidents would not be a standardized product. protection on the real estate related properties. the products would not be standardized on the product. you are dealing with these mart backed securities.

not because they would be able to go through the clearing house but would be in a non-standardized products. a core part of the system like aig made. to potentially have the ee lick nation of the swap.

the inability to put the capitol behind. > thank you, mr. chairman. thank you, mr. second. i want to focus my questions in the area of commodities. you have spoken about the good

way to keep the parties undertaken. their assets tend to be tide up in reinvestments. who two you think this will play on naun financial entities. jo we are trying to get the balance right.

a systematic source of confidence could not understand or support. we'll try to be careful and get it right. i'm concern abouted consolidation and the fact of failing. i don't want to go there.

you talk about the uniform. companies continuing to participate in their market if they continue to have a cash capitol. because of the leverage they take on holds adequate capitol of risk. i've heard your concerns and will work with you to work out those concerns.

my view is that those capitol requirements did not provide the protection. you occupy one of the most positions in this arena i was

start willed to hear your response to mr. posy. let me finish. that's fine. that's not credible with me and maybe some other folks. and the rest of the world says no thanks. and business begins to go to market $like dubai and other places. can you quantify with us the

general view is our system is stronger. we got that right in the path. it proved to be a great z÷benef. >> even if we do get it right,

we have to agree that's a result we'll have to live with. thank you for being here today. >> the gentleman from california, mr. chairman. >> if the taxpayer would bail them out as it has. boyars are looking at their counter party saying there may not be enough capitol there.

i think i understand your concern and i believe i share the premise. if we are going to be successful, we have to be sure we a drosz this.

a principal this came from the source of the monday owe lines. they received no's answer in the governments. is it possible that a der rif tiff issue today is set. i don't think that question responds. do you want to use this

opportunity to tell the financial markets that there is no bail out. do you want to us the opportunity to tell our con stit u wepts that this might result in the bail out for tomorrow. >> i want to delay the case of why we need those incidents. >> i want a yes or no answer. >> no. i'm not going to answer that way. i'm not going to add.

i am happy to talk to you about those things. >> the gentleman from california is next. >> there is one that raises concerns let me raise that with you. this idea as you portrayed it seems to allow propping up struggling firms.

this is how it reads. the regime also with a failure to insure tooksnalize. guaranteeing the liability of the firm or makingic witty invest. such authority is of course markedly different from a resolution authority that would entail an ordererly